Market Update for April 20
The recovery of lost grounds on the Nigerian Exchange continued on Thursday when the benchmark NGX All-Share index extended its gains, closing higher on increased demand for stocks, especially financial services providers, in the midst of audited corporate earnings hitting the market with impressive dividend payouts for the full year 2022. Also, Q1 numbers released so far look impressive and a good start for the current financial year, despite the mixed economic outlook for 2023.
The seeming positive momentum and sentiments returning to the equity space at this moment is attributable to the undervalued state of the market as revealed by the prevailing low price to earnings ratio and rising inflation that continues to make fixed income yields unattractive despite the high interest rate. The gradual return of liquidity to the market due to dividend payments and expectation of more earnings are likely to give market direction as the nation continues another season of transition of government to a new administration amidst the increasing geopolitical tensions across the globe.
Also the prevailing low prices of many stocks in the market due to price adjustments that have made many companies attractive for new entry and repositioning of portfolios at a time of high inflation and contracting economic activities due to the high cost of funds that is impacting negatively on the general economy.
This rebound can be sustained if the selling sentiment among the highly priced stocks moderates and liquidity in the market improve further on dividend payment as more and more companies hold their AGM for shareholders to approve payment that will support reinvested into the market, especially the by majority foreign core investor.
Thursday’s positive close extended the NGX’s recovery as consolidation already started on a high traded volume and positive market breadth amidst strength returning to market and buying interest in pending 2022 audited financials and Q1 2023 earnings reports. More companies are notifying the NGX of their board meetings and approval of Q1 financials. On Thursday also, Accesscorp, Transcorp Hotel and Stanbic IBTC submitted impressive Q1 financials, except for Transcorp Hotel that posted mixed numbers to kick start its 2023 financial year.
The market remained on the decline phase from its overbought state as the All-Share index traded below the 50-Day simple moving average and EMA to signal a bottom reversal pattern for technical traders and discerning investors. This, however, requires confirmation before investors can jump into any position, especially as stocks recently markdown have rebounded on the back of their prevailing undervalued state. Q1 numbers are likely to come predominantly mixed, due to the low economic activities during the period as a result of to cash crunch.
The prevailing dividend yields and low market price to earnings ratio provides better opportunities for discerning investors to hedge against inflation even when fixed income market yields look attractive. There is equally the uncertainty of a rate crash by the incoming government to drive the economy, just as a policy shift may be a plus for equities on a likely financial market and economic reset. Market volatility remains at the extreme on mixed sentiment as T-line stay above the index action ahead of the next market forces, due to the increasing number of companies announcing their board meeting dates to approve Q1 2023 numbers.
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Oil price oscillation continued, as it had further pulled back to trade at $81.18 per barrel in the midst of demand concerns and mixed global macroeconomic data, from the matured economics. Just as attack on Ukraine is rising and geopolitical tension here and there across the globe, the prevailing high interest rate regime and soaring inflation, despite slowing down across the globe remain potent threat to world economy. Also, supply tightened due to the Russia-Ukraine war that entered the second year. The up and down movement of oil price also continues to drive volatility across markets.
Meanwhile, Thursday’s trading opened on the upside which was sustained despite oscillating on buying and selling interests among blue chips and large cap companies, a situation that pushed the NGXASI to an intraday high of 51,363.29 basis points from its lows of 51,019.11ps, before closing above its opening figure at 51,355.74bps.
Market technicals were positive and strong with higher volume traded, when compared to the previous session in the midst of breadth favoring the bulls on buying sentiment as revealed by Investdata’s Sentiments Report showing 98% buy position and 2% sell volume. The total transaction volume index stood at 1.63 points, just as momentum behind the day’s performance was weak going by Money Flow Index at 37.19pts, from the previous day’s 30.52pts, indicating that funds entered the market.
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Index and Market Caps
At the end of Thursday, the NGXASI gained 177.09 basis points, closing at 51,355.74bps from the 51,209.01bps it opened, representing a 0.35% up, just as market capitalization rose by N92.79 billion to close at N27.96tr, from the previous day’s N28.87tr, which also represented a 0.35% appreciation in value.
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The upturn was driven by position taking in the shares of Accesscorp, Fidelity Bank, FCMB, Stanbic IBTC, Transcorp Hotel, Transcorp, FBNH, Sterling Bank, NEM Insurance and Ikeja Hotel among others, which impacted positively as Year-To-Date turned green to gained 0.20%. Market capitalization YTD gain stood at N69 billion, representing 0.17% above its opening level for the year.
Mixed Sector Indices
Sectorial performance indexes were mixed, as the NGX Banking and Insurance closed 2.89% and 2.07% higher respectively, while NGX Energy led the decliners after losing 0.22%, followed by Consumer and Industrial goods with 0.12% and 0.09% respectively.
Market breadth was positive, as gainers outpaced losers in the ratio of 28:15, while activities in volume and value were mixed after investors exchanged 600.78 million shares worth N5.05bn, with volume driven by trades in Transcorp, Accesscorp, UBA, Fidelity Bank and Zenith Bank.
Transcorp Hotel and Accesscorp were the best performing stocks after gaining 10% each, closing at N7.15 and N9.90per share respectively, on market forces and impressive dividend payout. On the flip side, Champion and Jaiz Bank lost 9.96% and 8.42% respectively, closing at N4.43 and N0.87per share, purely on selloff and profit taking.
We expect mixed sentiments to continue after the holidays as bargain hunting and positioning hit the market on low new attractive price levels and sound fundamentals, ahead of more Q1 earnings expectation in the midst of price adjustment for dividend. Defensive stocks to protect their portfolios post-dividend adjustments. Any pullback at this point may add more strength to upside potentials. As such, investors should take advantage of price correction. Also looking at the trends and events across the globe and domestically.
CRO|Investdata Consulting Ltd
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